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The Department of Defense (DOD) reported that under its current policy, beneficiaries eligible for both TRICARE and the Department of Veterans Affairs' (VA) health care (dual eligible beneficiaries) are not allowed to utilize the services offered by both health care systems for treatment for the same episode of care. For example, if a beneficiary experiences back pain and seeks treatment from VA, the beneficiary must then receive all care related to that back pain from VA. Should the beneficiary then decide to seek treatment for the back pain from TRICARE, any claims related to that care would be denied. According to DOD, this policy was established to ensure continuity of care for beneficiaries and to ensure that there was no duplication of care or of payments from TRICARE or VA. Under the policy, if beneficiaries are dissatisfied with the care provided by VA, they are unable to switch to TRICARE to receive services for the same episode of care. On April 16, 2003, DOD reported to the Congress on a proposal to change its policy and promulgate regulations for coordinating care between DOD and VA. As agreed, we focused our review on the reasonableness of DOD's process. To do so, we reviewed the report submitted to the Congress and TRICARE policies, and interviewed agency officials from DOD and VA. Our work was conducted in June 2003 in accordance with generally accepted government auditing standards.

DOD proposes to change its basic policy to enable dual eligible beneficiaries to access both systems for the same episode of care, thus ensuring full freedom of choice. DOD also proposes to pay for medically necessary care to the extent that such care would be covered by TRICARE. DOD's proposal appears reasonable, and it is in the process of developing regulations to implement it.